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This material has been produced by RBS sales and trading staff and should not be considered independent.

The Round Up

16 October 2009

Issue No. 198

The Round Up is a comprehensive daily note produced by the RBS Warrants

team providing an overview of market movements along with quality ideas forwarrant traders and investors.

In todays issue

Global Market Action Scoreboard, commentary

Aussie Market Action SPI Comment, Events & Dividends

CSL (CSLKZG) MINI Update Getting back to buy zone

NWS (NWSKZI) MINI Trading Buy Result a catalyst

Banks (NAB,ANZ,WBC) Sector Update Pre-results form guide

Round Up Corner Strategy Acquisition candidates

Equities

Move Last % Move Range Volume

ASX 200 +28.8 4859.9 +0.6% u.c to +64 $5.6 bn(A)

SPI - yesterday +31.0 4868.0 +0.6% +22 to +63 19,500(L)

Dow Jones +47.1 10062.9 +0.5% -38 to +47 High

S&P 500 +4.5 1096.6 +0.4% -6 to +5 Avg

Nasdaq +1.1 2173.3 +0.0% -14 to +1 Avg

FTSE -33.2 5223.0 -0.6% -37 to +12 Avg

Commodities

Move Last % Today % Past Month

Oil-WTI spot +2.4 77.6 +3.2% +9.4%

Gold Spot -13.1 1049.3 -1.2% +4.2%

Nickel (LME) +11.6 849.8 +1.4% +12.3%

Aluminium (LME) +0.5 85.3 +0.6% +3.3%

Copper (LME) +3.0 284.4 +1.1% +1.4%

Zinc (LME) +0.0 91.1 +0.1% +9.5%

Silver -0.5 17.3 -3.0% +2.1%

Sugar +1.1 23.3 +5.1% +6.9%

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Dual Listed Companies (DLCs)

Move %Move Last AUD Terms Diff to Aus

NWS (US) 0.08 0.01 +14.8 c 16.04 +17.3 c

RIO (UK) -52.00 -0.02 +29.5 c 52.10 -1269.0 c

BLT (BHP UK) -30.00 -0.02 +18.1 c 32.04 -686.4 c

BXB (UK) -7.75 -0.02 +4.1 c 7.29 +15.1 c

American Depository Receipts (ADRs)

Move %Move Last AUD Terms Diff to Aus

BHP (US) 1.01 0.01 +72.2 c 39.24 +34.5 c

AWC (US) -0.09 -0.01 +6.8 c 1.86 -3.9 c

TLS (US) -0.06 0.00 +14.4 c 3.13 +0.3 c

ANZ (US) -0.38 -0.02 +22.8 c 24.73 -18.2 c

WBC (US) 1.04 0.01 +124.0 c 26.97 -13.5 c

NAB (US) -0.30 -0.01 +29.1 c 31.59 -16.3 c

LGL (US) -0.78 -0.03 +29.0 c 3.15 -6.9 c

RMD (US) 0.70 0.01 +48.3 c 5.25 +2.6 cJHX (US) 0.34 0.01 +36.5 c 7.94 -14.7 c

PDN (CAN) -0.09 -0.02 +4.5 c 4.74 -7.3 c

Overnight Commentary

United States Commentary

Despite weakness across financials and a rough start, the Dow turned things around in the 'pm' to close on its high, up another 47ptsand north of 10,000. Positive sentiment and ongoing strength from the Energy plays led the way. The S&P up another 0.4% and theNasdaq posting a small gain.

Financials - Citigroup shares down 5%(S&P100's worst)despite reporting a smaller loss than most were expecting(-21cps vs -29cps)the market still worried about reserves. GS down 2%despite posting a 3Q profit of $5.25/share, more than triple last year's third quarternumber. Bloomberg consensus sat at $4.18, but the unofficial whisper was a record breaking $6/share.

Eco - Headline CPI for September in line at +0.2%, Ex Food&Energy +0.2% vs +0.1% expected, Empire Manufacturing 34.57 vs 17.25and up from 18.88 in the month prior. Initial Jobless Claims 514K vs 520K and down on last weeks 521K. Continuing Claims 5992K vs6000K. Philly Fed 11.5 vs consensus at 12.0 and down from 14.1.

Techs - After market IBM reported 3Q profit of $2.40/share vs consensus at $2.38 and lifted guidance for the FY, mgmt now looking forat least $9.85/share up from $9.77. Despite the better than expected numbers, a drop in signed services contracts spooked the mktand the stock is trading nearly 4% lower in late trade.

Techs - Post the close Google also beat the street with their 3Q offering, profit for the period up 27% on pcp driven by a jump indemand for online ads and e-commerce. EPS ex-items of $5.89/share compares with consensus at $5.43, the stock up 2% in aftermarket.

Semiconductors - Advanced Micro Devices flat after market reporting a smaller than expected loss in the 3Q. -18cps vs -44cpsexpected, Revenue $1.4bln vs $1..27bln.

United Kingdom & Europe Commentary

The FTSE fell 0.6% or 33pts as banks dragged the index lower and profit taking in the miners also weighed. The FTSE Eurofirst 300eked out a gain of 0.1%, the DAX fell 0.4% and the CAC was flat.

UK Banks - Earnings from GS and Citi failed to live up to the reporting from JP's which saw the sector weaker. Barclays, HSBC,Standard Chartered, RBS and Lloyds fell between 0.4% and 2.1%.

Retail - Sainsbury was the top gainer in London, up 10.1%, after talk of a takeover from the Qatar Investment Authority. Thespeculation helped Tesco and Morrison rise 1.7% and 1.8% respectively. German retailer Metro advanced 1.8% after a brokerupgrade.

Eco - Sterling racked up its biggest one-day gain against a basket of currencies in nearly a year after Monetary Policy Committeemember Paul Fisher told the FT the BoE's interest rate cuts and injection of money into the economy were working.

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Tech - Nokia sank 10.9% after the phone maker announced net 3Q losses of 559m because of a 908m write-off by joint venture,Nokia-Siemens Networks. A consensus of analysts polled by Reuters had predicted a net profit of 339m.

Commodiites Commentary

Miners - Weaker metal prices and some profit taking after yesterdays gains saw the sector lower. BHP fell 1.6%, Rio was off 1.7% andAnglo dropped 4.1% after Xstrata, off 2%, said it would not make a formal takeover offer.

Energy - Despite another good night for the crude price the majors were lower on profit taking. BP fell 0.6%, Shell was off 1.5%, BG

Group dropped 0.7% and Tullow fell 2.3%. In Europe Total fell 0.1%, Statoil was off 0.3% and Repsol ended 0.7% lower.

SPI Commentary

The SPI traded up 30pts or 0.62% to 4867. Open at 4880 with a high of 4900 and a low of 4859. 21,671. Overnight the SPI traded up17pts to 4885.

SPI Intraday SPI Daily

*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS

Upcoming Economic Events for the Week

Monday AUS

US Columbus Day holiday

Tuesday AUS NAB Business confidence, NAB Business conditions

US

Wednesday AUS WMI consumer confidence

US Import price, retail sales

Thursday AUS RBA Governor speaks, RBA bulletin

US Business inventories, FOMC minutes, CPI, NY Fed Empire PMI

Friday AUS

US Philadelphia Fed index, industrial production, Michigan consumer sentiment

*Dates are indicative only and may change

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MINI Update:

CSL Limited (CSLKZG) Getting back to buy zone

CSL pulled back last week as the market shifted away from defensive names and those exposed to a rising AUD/USD.Look to buy CSL below $31. CSL reaffirmed its profit outlook yesterday at the AGM and the stock was up on the back ofthat, however they did warn of the impact of the rising AUD. RBS Research have a buy recommendation on the stock

with a $36.30 target price. CSL is likley to continue to benefit from Swine flu vaccine orders and the share buybackcontinues which will support falls in the share price. Buy CSLKZG

Source: IRESS

CSL is trading in a pennant formation evidenced by the formation of higher lows and lower highs. The stock pulled backfrom the top of its pennant last week. Look to buy below $31.

WHO says it could take years to downgrade swine fluIt could take years for the World Health Organisation to downgrade the H1N1 (swine) flu from a pandemic to seasonal-likevirus, the UN agency said over the weekend. The WHO moved its six-point pandemic alert level to the top level in June2009. We believe that should the pandemic continue for another 2 or 3 years, governments across the world are likely toeither expand their vaccination process or continue to stockpile the vaccine. This would be a potential boon for globalH1N1 makers, including CSL. RBSResearcharecurrentlyassumingthevaccineordersareoneoffsbutshouldthesizeoftheordercontinueintoFY11,thiswouldincreaseEPSandvaluation.

RBS MINIs over CSL

Security ExPrc Stop Loss CP ConvFac Delta Description

CSLKZG 2362.05 Long 1 1 MINI Long

CSLKZH 2069.14 Long 1 1 MINI Long

CSLKZQ 4406.25 Short 1 1 MINI Short

CSLKZV 4803.67 Short 1 1 MINI Short

CSLKZW 4011.05 Short 1 1 MINI Short

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MINI Trading Buy:

News Corporation (NWSKZI) RBS Trading Buy

RBS Research has moved to a trading buy on NWS with the 1Q10 result on 5 November as a key potential share pricecatalyst. While the 1Q10 result is likely to be weak, RBS expect positive outlook commentary, potentially raising FY10guidance. Trade NWS into the result thorugh NWSKZI MINI Long with a target of $16.70

Source: IRESS

News Corp has made increasingly positive comments on the trading environment at recent investor conferences and hasindicated the advertising environment is improving in many of its key markets. Its cable division also looks to be on trackfor another strong year, with cable operating profit expected to grow by c20% in FY10. RBS Research see guidance forFY10 operating profit growth of "high single digits" as conservative and see scope for this to be raised by NWS

News Corp remains cheap on an EV/EBITDA multiple of 6.8x FY10F (associate-adjusted) and 5.8x FY11F. The stock istrading below its US entertainment peers (eg, Disney on 8.2x FY10F EBITDA on Reuters consensus forecasts) and evenbelow its main US TV peer (CBS is on 7.7x FY10F EBITDA on Reuters consensus).

.

RBS MINIs over NWS

Security ExPrc Stop Loss CP ConvFac Delta Description

NWSKZI 774.06 Long 1 1 MINI Long

NWSKZR 1986.01 Short 1 1 MINI Short

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Sector Update:

Banking Sector (NAB,ANZ,WBC) Pre-results form guide

Bank reporting season is approaching. RBS Research believe this results season is likely to be dominated by talk ofrecovery. A faster domestic recovery than is generally expected will probably have significant positive implications forBDDs, margins and asset growth. Expect this to form the basis for cautiously optimistic outlook statements. RBS

Research have an overweight sector call on the banks. Play the banking reporting season and associated dividendsthrough RBS Self funding isntalments which benefit from dividends, franking credits and interest deductibility. ANZSZW,NABSZW and WBCSZV are the products to use.

Source: IRESS

Results season NAB 28 Oct, ANZ 29 Oct, WBC 4 NovNAB kicks off the banks reporting season on 28 October. RBS Research forecasts for the three reporting banks are:

NAB, cash NPAT A$3,722m, FY09 dividend A$1.37 ANZ, cash NPAT A$2,963m, FY09 dividend 96c WBC, cash NPAT A$4,432m, FY09 dividend A$1.12.

We expect NAB to lead the banks in cash EPS growth (-8.3%), followed by ANZ (-14.4%) and WBC (-17.2%).

RBS Research believe this result season is likely to provide confirmation of improvement in the form of both less stressedexposures and declining arrears, and possibly at least one CEO calling the top of the BDD cycle. A faster recovery islikely to have significant implications for BDDs, margins and asset growth.

Also expect outlook statements to be cautiously optimistic. However, recovery brings its own challenges, with concernsaround funding growth in the current high-cost environment, the impact of higher interest rates on asset growth, andimpending regulation following stabilisation in the US and the UK.

With greater earnings upside potential and narrowing relative discounts, we believe NAB and ANZ (both Buy) have themost upside potential and they are RBS Research preferred recovery plays.

RBS SFIs to trade bank reporting season

Security ExPrc Stop Loss CP ConvFac Delta Description

ANZSZW 10.633 11.67 Long 1 1 Self Funding Instalment

NABSZW 13.6710 15.00 Long 1 1 Self Funding Instalment

WBCSZV 14.1220 15.50 Long 1 1 Self Funding Instalment

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RBS Round Up Corner:

Acquisition Candidates

As the global financial crisis continues to recede, RBS Research Strategy believe we are about to enter into aninvestment/M&A cycle in the market. Balance sheets are lowly geared, asset values are off their peaks and managementwill be starting to think of expansion rather than survival. We identify potential acquisition candidates.

Both corporate balance sheets and cash flows are strongCorporate cash flows remained robust in 2009 and we forecast growth will resume in 2010. Similarly, corporateAustralias balance sheet is in good shape following 18 months of capital preservation and record equity issuance.Corporate Australia is therefore well placed to expand over the next 6-18 months.

MINIs approaching stop loss

Underlying MINI Code MINI Type Strike Stop Loss Share PriceApprox. MINI

ValueShare:

Stop Loss

RIO RIOKZQ Short $72.57 $65.38 $ 64.81 $ 7.76 0.9%

QAN QANKZQ Short $3.40 $3.05 $ 3.01 $ 0.39 1.3%

JBH JBHKZP Short $24.57 $20.90 $ 20.58 $ 3.99 1.6%

CBA CBAKZQ Short $62.97 $56.70 $ 55.55 $ 7.42 2.1%

NCM NCMKZT Short $41.86 $37.71 $ 36.68 $ 5.18 2.8%

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SFIs approaching stop loss

Underlying MINI Code MINI Type Strike Stop Loss Share PriceApprox. MINI

ValueShare:

Stop Loss

BXB BXBSZW Long $4.50 $5.18 $ 7.09 $ 2.59 26.9%

BSL BSLSZW Long $1.77 $1.95 $ 3.02 $ 1.25 35.4%

LLC LLCSZV Long $6.01 $6.90 $ 10.69 $ 4.69 35.5%

AGK AGKSZX Long $8.02 $8.81 $ 14.12 $ 6.10 37.6%

LEI LEISZV Long $20.62 $22.64 $ 36.41 $ 15.79 37.8%

For further information please do not hesitate to contact us on the details below

Equities Structured Products & Warrants

Toll free 1800 450 005 www.rbs.com.au/warrants

Trading Products Team

Ben Smoker 02 8259 2085 ben.smoker@rbs.com

Robbie Taylor 02 8259 2018 robbie.taylor@rbs.com

Ryan Corrigan 02 8259 2425 ryan.corrigan@rbs.com

Investment Products Team

Elizabeth Tian 02 8259 2017 elizabeth.tian@rbs.com

Tania Smyth 02 8259 2023 tania.smyth@rbs.com

Robert Deutsch 02 8259 2065 robert.deutsch@rbs.com

Mark Tisdell 02 8259 6951 mark.tisdell@rbs.com

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240530) (RBS Equities) and has been taken from sources believed to be reliable. RBS Equities does not make representations that the information isaccurate or complete and it should not be relied on as such. Any opinions, forecasts and estimates contained in this report are the views of RBS

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Copyright 2009. RBS Equities. A Participant of the ASX Group.

Explanation of Warrant Tables:

Security refers to the code ascribed to the warrant, ExDate refers to the date on which the warrant expires or is reset, ExPrc refers to the

exercise price, or second instalment payment, CP tells you whether the warrant is a call or a put, ConvFac the conversion factor of the warrant

which tells you how many warrants you need to exercise in order to take possession of 1 share, Delta tells you how much the warrant will move for a

1c move in the underlying security, Description Tells you the type of warrant.

All charts taken from IRESS unless indicated otherwise

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